What is the cost of common stock

Assignment Help Financial Management

Reference no: EM131886309

Hoosier Manufacturing (HM) has 15,000 bonds outstanding with a 7.30%/year coupon rate (with semi-annual coupon payments) and 9 years left to maturity. The bonds sell for $960.45 per bond. HM's common stock has a beta of 1.2. The 10-year Treasury-Bond rate is currently 1.9%, and historically, the market has earned 7% more per year than the 10-year Treasury rate. HM has 100,000 shares of common stock outstanding at a market price of $307.91/share (and a book value of $225.00/sh.). The appropriate marginal tax rate is 35%. a. What is the before-tax cost of debt and what is the after-tax cost of debt? b. What is the cost of common stock? c. What is the weighted average cost of capital for Hoosier Manufacturing?

Reference no: EM131886309

Questions Cloud

Determine the equal annual costs the department : Determine the equal annual costs (EAC) the department will incur for this proposal. (i.e. , Perform an annual worth analysis)

Annual worth and rate-of-return analysis : The Western Coal, Inc. problem was presented in lecture as an example of Present Worth , Annual Worth and Rate-of-Return analysis.

Calculate the stock standard deviation-expected return : Calculate the stock's expected return. Calculate the stock's standard deviation.

Business risks does the red flags rule protect against : What business risks does the Red Flags Rule protect against? What is your profit or loss on your contract?

What is the cost of common stock : What is the before-tax cost of debt and what is the after-tax cost of debt? What is the cost of common stock?

What is the yearly-return standard deviation for portfolio : The correlation coefficient between Sodastream’s returns and Pegasus’s returns is 0.7. What is the yearly-return standard deviation for this portfolio?

Compute the total percentage return on your investment : Compute the total percentage return on your investment.

The interest rates in the term structures for maturities : Calculate the interest rates in the term structures for maturities of one to five years for following series of one year rates.

What is your total net profit on investment : You purchased eight General Motors call-option contracts with strike price of $28.00 at cost of $1.75 per option. what is your total net profit on investment?

User Account

All Pages